Why Shaw so silent now on plum­met­ing dol­lar?

THE EDITOR, Sir: ‘THE MORE things change, the more they re­main the same’ is a tru­ism that bears re­peat­ing now, for the Ja­maica Labour Party, now in government, made heavy weather of the pol­icy of de­val­u­a­tion that the pre­vi­ous government, con­sti­tuted by the Peo­ple’s Na­tional Party, pur­sued. This pol­icy, we were told, was nec­es­sary, as the Ja­maican dol­lar was viewed as be­ing over­val­ued in re­la­tion to the world’s re­serve cur­rency, the US dol­lar, and in or­der to make our ex­ports more com­pet­i­tive, de­val­u­a­tion was a “ne­ces­sity”.

This ne­ces­sity was to take the Ja­maican dol­lar to a com­pet­i­tive ex­change rate of about J$120:US$1. The then Op­po­si­tion, led by shadow fi­nance min­is­ter Aud­ley Shaw, raised great alarm – and cor­rectly so – at the steady and con­sis­tent trend of de­val­u­a­tion of an al­ready abused cur­rency. He then promised a halt to the slide, along with some amount of ‘pros­per­ity’ in the form of an in­crease in the in­come tax thresh­old.

Now, some eight months into this JLP ad­min­is­tra­tion, the dust has long set­tled on elec­tion­eer­ing, and the dol­lar again is in seem­ing free fall, so much so that in May 2016, the Ja­maica Cham­ber of Com­merce is­sued a state­ment say­ing that it was con­cerned about the level of de­val­u­a­tion af­fect­ing the cur­rency, es­pe­cially with in­fla­tion hold­ing steady and the NIR ap­pear­ing healthy. The de­pre­ci­a­tion has only in­creased since then.

NO HALT IN SIGHT

In spite of much talk on the part of now Min­is­ter Shaw, as well in­ter­ven­tions by the Bank of Ja­maica, the lat­est com­ing last Fri­day when US$30m was sold to forex mar­kets, the dol­lar has de­pre­ci­ated by six per cent since Fe­bru­ary and by 7.52 per cent since Jan­uary, fig­ures which have al­ready sur­passed the en­tire de­val­u­a­tion seen for 2015.

With no halt in sight, this down­ward spi­ral can only serve to un­der­mine the very ‘pros­per­ity’ that Mr Shaw, et al, have promised. It goes with­out say­ing that this slide must be ar­rested, for in a coun­try such as ours where the ma­jor­ity of raw ma­te­ri­als used in pro­duc­tion have to be im­ported, “de­val­u­a­tion for com­pet­i­tive­ness” must be seen for what it re­ally is – a false gospel.

If the slip­page con­tin­ues, the in­come tax break may start to ring hol­low, for de­val­u­a­tion and pros­per­ity can­not go hand in hand. NOEL MATHERSON noel­math­er­son@gmail.com